The volume of mortgage applications last week fell to the lowest level since December 2014, according to a new report from the Mortgage Bankers Association, providing another sign the housing market is slowing.

The decline was led by a 5 percent drop-off in purchase applications to a nearly two-year low, followed by a 3 percent decrease in applications to refinance an existing loan.

Buyers are facing a trifecta of unfriendly housing conditions: short supply of homes, increasing prices and rising mortgage rates. The rate on the 30-year fixed-rate mortgage – the most common home loan among buyers – hit 5.15 percent last week, the highest level in more than eight years, according to the MBA.

“That means they qualify for less” in a competitive housing market, says Pava Leyrer, chief operating officer of Northern Mortgage Services in Michigan. Struggling buyers still in the market are taking whatever house they can get given the tight inventory, she says. “Some houses I wouldn’t touch with a 10-foot pole,” Leyrer says.

The time for refinancing into a lower rate is also long gone for most homeowners, thanks to higher rates. The share of refinances fell to 39.1 percent of total applications from 39.4 percent the previous week.

If homeowners do refinance, many are pulling out cash to make home improvements or pay off credit-card debt, says Scott Sheldon, branch manager of New American Funding in California. Interest rates on credit cards are increasing as the Federal Reserve hikes rates.

“The payments on those things are painful,” Sheldon says, “but if you can wrap it all into fixed-rate loan, for a lot of families, that’s a smart financial decision.”

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